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The conventional wisdom is that markets are down due to heightened fears over a Greek default or exit from the Euro. However, I wonder if the volatility is also related to the Chinese stock market correction, which is down over 20% in the past week.

The problems with Greece are in the $250 billion range…China’s number in the Trillions. A lasting slowdown in the Chinese economy has global ramifications.

Since June 10, the Shanghai index has lost something in the neighborhood of $2 trillion. It was down again today even though the Bank of China lowered interest rates 25bp over the weekend.

The DOW broke below it’s 200 dma, while the S&P500 is hovering just above its. Volume was around 10% above average, which is tame considering the large drop…so that’s reassuring.

The question at hand is when to buy back in. The personality of this market has been to recover extremely quickly and bounce up to new highs. We’ll have to wait and see if the pullback in China has any lasting residual effect on the US market.

Also of note is word from Puerto Rico that they can’t meet their debt obligations. In a sane world that would send chills through the municipal bond market but perhaps Detroit and Stockton have numbed bond dealers.